Trade facilitation finally gets its due

By Matthew T. McGrath -- Logistics Management, 9/1/1999

The needs of those who are on the front lines of international trade--the professionals who manage the movement of goods and services between nations--will for the first time be squarely in focus during multilateral trade negotiations organized by the World Trade Organization (WTO). Those international talks, tentatively dubbed "The Millennium Round," will open in Seattle this November.

The talks will cover many of the same policy issues as in past rounds, such as further tariff reductions, technical trade barriers, and agricultural subsidies. What's different this time is that trade facilitation will be a separate subject of negotiation in the comprehensive trade round. In this age of increasing volume and speed of international transactions, customs-clearance procedures are being recognized at the highest levels as a significant barrier to free transnational movement.

By the end of the Uruguay Trade Negotiating Round in 1994, it was becoming apparent that many of the traditional forms of trade restraints were being reduced or subjected to more predictable standards. At the same time, the new emphasis on global rationalization, just-in-time delivery, and inventory cost control led companies to place a higher value on rapid customs clearance of imported goods, one of the oldest and most jealously guarded of sovereign prerogatives. Some WTO member states, moreover, were beginning to recognize that cumbersome customs rules were having a negative impact on their national economies by driving off foreign investors.

The publication of model international customs guidelines by the International Chamber of Commerce in 1997 brought these concerns to the World Trade Organization's attention. That led to a ministerial mandate to WTO member governments to explore the simplification of trade procedures. Consequently, most of the major participants in the WTO, including the United States, the European Union, and Canada have designated the improvement and harmonization of customs procedures as a primary objective of the anticipated Millennium Round talks.

"Trade facilitation," however, covers a host of procedural concerns, from entry processing and data input to frequency of drug-interdiction inspections. A 1998 European Community study identified the following as being the most significant customs roadblocks to international trade:

- Unnecessary documentation requests, including multiple proofs of value and other forms;

- Repeated demands for the same forms by different agencies of both the importing and exporting administrations; and

- Lack of harmonization between countries in the data-entry inputs, which requires traders to modify submissions for various markets.

Other critical issues identified by the study included the arbitrary setting of valuation bases, preshipment-inspection problems, and the lack of published rules.

Although it is heartening to the international trader to know that customs procedures will receive high-level attention in upcoming negotiations, it will be for naught unless all involved agree on what is a meaningful measure of progress. The U.S. business community's answer is a reduced cargo arrival-to-release time, or "cycle time." Measurable reductions in cycle time by WTO member countries' customs administrations will provide a true gauge of whether customs procedures have actually been improved or have simply become more "transparently" institutionalized. "Facilitation" will be the means for achieving cycle-time improvement, which is the practical goal.

Matthew T. McGrath is a partner in the law firm of Barnes, Richardson & Colburn in Washington, D.C., specializing in customs and international trade law practice. Mr. McGrath is a member of the ICC's Committee on Customs and Trade Regulations, which participates in deliberations of the World Customs Organization, and also is Washington Counsel to the American Association of Exporters and Importers. He may be reached at (202) 457-0300.